tv Nightly Business Report PBS July 22, 2014 1:00am-1:31am PDT
this is "nightly business report" with tyler mathisen and susie gharib. >> battling back. it started out ugly, then got a little less so after president obama made it clear that, as of now, there will be no new sanctions against russia. turning investor attention back to roft. netflix milestone. 50 million subscribers now use the service. helping profits double. but is it enough to keep the stock firing on cylinders? >> as wall street turns, what are the business world's biggest soap operas just took another twist as the chase for allergan grows increasingly hostile. all that and more tonight on "nightly business report" for monday, july 21st. good evening, everyone and welco welcome. i'm tyler mathisen. >> i'm sue herera filling in for susie gharib. it was a wild day in the markets
with stocks kicking off the week to the downside as investors weighed the political and economic fallout of the conflict in gaza and the crisis over that downed passenger jet in ukraine. as the investigation into the exact cause of that incident crawls along, president obama asks for russia's help at the site of the tragedy. but he stopped short of outright blaming moscow and made no mention of a ramp-up of economic sanctions. >> if russia continues to violate ukraine's sovereignty, and to back these separatists, and these separatists become more and more dangerous and now are risks not simply to the people inside of ukraine but the broad international community, then russia will only further isolate itself from the international community and the costs for russia's behavior will only continue to increase. >> on wall street, stocks began the day sharply lower with the dow down as much as 125 points. but the major averages battled right back. and at the close the dow was down just 4 poin. the nasdaq lower by 7, and the
s&p 500 off by 4. the volatility in equities impatted the treasury market, as well, with the yield on the 30 year bond dipping as far as 3.24%, the lowest level since june of last year. bob pisani has more now on the swings in the market today, what investors are focusing on and not focusing on. >> the markets started down and they stayed down until president obama spoke shortly after 11:00 a.m. eastern time on the ukraine crisis. he called on russia to use its influence with separatists to allow investigatorsnv full acce to the crash site. but stocks began coming off their lows when it became clear he would not announce any new sanctions against russia at that time. now despite the tragedy, the markets have taken the crash in stride. because the economic impact on europe and the u.s., so far, is still limited. >> the market believes they are containable, so that while --
while they are tragedies, they do not spill over. even if the spillover affects, it doesn't matter, earnings are strong and the fed is there. >> indeed with little less than 1/5 of the s&p 500 reporting, earnings are up some 7% compared to last year. while revenue growth is modest companies are continuing to find ways to cut costs and improve earnings, and that along with continuing low interest rates are the main factors keeping the indices near historic highs. european union foreign ministers meet tomorrow and despite the rhetoric, the markets still believe no big sanctions will be coming against russia in the next few days. that could change if separatists continue to block access to the crash sites. for "nightly business report" i'm bob pisani at the new york stock exchange. well today is the start of one of the busiest weeks of the second quarter. earnings season, and one of the hottest momentum stocks on wall street posted its results after the closing bell. netflix. the video streaming service
earned $1.15 per share. that was a penny below wall street forecasts. but, revenue was better than expected on a sharp increase in subscriptions. and with that, shares initially moved higher in late trading. so how many more tv watchers are tuning in to netflix? and where will it be streaming those movies next? julia boorstin has more. >> reporter: bottom line, netflix is adding customers faster than expected. reporting more than 50 million streaming subscribers for the first time. so what drove that subscriber growth? well netflix says specific viewer numbers, the company says it got a big boost from the popularity of the second season of orange is the new black. looking forward the streaming video company says it expects to add sub describingers even faster, prong exing the addition of 3. 7 million new streaming subscribers in q3, most of them coming from overseas. netflix announcing in september it will launch in france, germany and other european markets with over 60 million new broadband households.
for "nightly business report" i'm julia boorstin in los angeles. so other big tech companies on tap to report earnings this week as well. apple and microsoft, both are set to release their second quarter earnings results tomorrow. kim forest joins us now to tell us what she's expected from these two tech giants. she is senior equity analyst with fort pitt capital group. welcome. >> thanks, thank you for having me. >> both of these reports are very important. but it's going to be interesting because microsoft has a new ceo. they had the nokia acquisition. so there's a lot to look for in these reports, isn't there? >> there really is. there is a lot of moving parts. and microsoft has a lot of change. but so does apple. and, well, they have a lot of potential change. i think investors would like to hear news of what they have next. and usually that's not what they do in earnings reports. but we'll see tomorrow. >> and what are you expecting? why don't you take apple first, since it's sort of a head line stock, not that microsoft isn't. >> sure.
well, i think it's more accessible to more people, regular investors, because they probably have at least one apple device. and that's the thing that's going to drive this stock. how many phones were sold? and how many ipads were sold? last quarter, ipads were a little disappointing, so i think the street is really going to be looking at that number. >> you know, kim, we also, of course, have that nokia acquisition for microsoft. and we have some layoffs that are coming from microsoft. it seems to me that that could really kind of be confusing in the report. there's going to be a lot to kind of separate out to get net/net what microsoft's performance was in the last quarter. >> exactly. and adding to this is the fact that you have so many people that follow and report on microsoft, and they may or may not have gotten a memo on how too do the accounting for this. so, it's going to be a confusing time tomorrow after 4:00. but we're going to be able to weed through that. and the thing that we really look at for microsoft, especially, is that parts of the
business that are geared more towards business, so that's the server and tools, and the office franchise. so those are the parts that we're going to be looking at closely. >> let's move on to two other tech companies that report later this week, amazon and facebook. i seem to be buying something from amazon every day. i bought a showerhead today, for goodness sakes, kim. what do you expect out of that company? >> i have to tell you this, i bought two things. i got a coffeemaker today from them and dog bowls. so you know, they really are the one-stop shop, aren't they? and we're not really -- the consumer stuff that they sell is kind of interesting, very low margin. what we're really looking at is what they're doing with the cloud. and they seem to always give you one piece of information but not another so it's really difficult to see if they're making money or not but that's a very intriguing business for somebody like us -- somebody like me to watch. >> facebook. give me the one metric that's going to be the most important
in that report tomorrow or in the analyst call. >> sure. mobile revenues. that's where people are focused on for this stock. and i think that's for good reason. we want to know if people are buying mobile apps, and how that's going to let them grow in the future. >> kim, thank you. from fort pitt capital group. valeant pharmaceutical's nasty and hostile takeover of allergan is getting nastier and more hostile. despite that investors sent shares of both companies higher today but as meg tirrell reports, things are just heating up. >> reporter: more twists in who's become one of the biggest soap operas on wall street. allergan, the maker of botox, is cutting 1500 jobs, in response to mounting pressure from valeant pharmaceuticals. the move comes three months into valeant's hostile bid for allergan. worth more than $50 billion. allergan says its restructuring will save $475 million a year.
valeant is porking with personing square's bill ackman, currently the largest holder of allergan stocks. he says today that allergan's thinning down was long overdue. >> allergan has 1200 basis points higher to spend 1200 basis points more on overhead than the competitive set. i mean, that's an incredible gap. and now they're going to start to close that gap which, of course, it generates an increase in earnings. but really what you're doingt over the next several years is cutting out fat you should have cut out a long time ago. >> valeant today said it contacted regulators in canada and the u.s. over what it called false and misleading statements. allergan's been making about its business model. it also urged allergan shareholders to vote for a special meeting called by ackman, who is aiming to replace the majority of allergan's board. >> why are we calling a special meeting? we are calling a special meeting so the shareholders can explain, express their views, that they want the valeant deal, or not. can decide they don't want it. at least that's the first time the company's going to have an opportunity to hear in an official way what their shades
believe. >> allergan has other plans. chief executive david pyatt told analysts investors are urging him to pursue acquisitions of his own. the company said it may consider a deal that would help it lower its corporate tax rate, a common theme this year known as an inversion. pyatt said it will certainly look for purchases that will add to earnings. in addition to slimming down allergan made big forecasts for its future. it predicts 20% annual earnings growth for the next five years but only time will tell how this soap opera will end. for "nightly business report" i'm meg tirrell. >> bill ackman the investor we just saw in meg's story is obviously a busy guy. he's also embroiled in a longtime short selling campaign against the vitamin supplement company herbalife, calling its sales model a classic pyramid scheme. shares of the company tumbled more than 11% today after ackman said he expects the company to collapse. ackman has long had a major short position in the stock, meaning he is betting that it will fall. >> more now on the international reaction to that downed passenger jet over ukraine.
russia has been condemned by the west for its support of the russian separatists who are likely to blame for the tragedy. it is getting support from china. >> reporter: china is warning against rushing to blame russia for the downing over ukraine of malaysia airlines flight 17. since the weekend the chinese press has been highly critical of the west's approach saying in editorials the country like the u.s. are too quick to point fingers at russia and moscow-backed rebels without hard evidence. tiny state news agency xinhua has called u.s. and australian officials rash. a community party backed newspaper the global times said the rush to judgment in the west is not based on known facts or logic. the state press is also takingl russia's point of view on the ukraine conflict saying the real culprit is a chaotic situation in ukraine, which it says has been fomented by western influences.
the comments are a signal that despite historical mistrust between china and russia, the two powers are increasingly finding common ground. both currently have strained relations with the west, and are accused of engaging in aggressive foreign policy that could destabilize their region. russia and ukraine and china in the east and south china seas. yet both are in need of diplomatic and economic support. even if the two may not see eye to eye on the price of gas, both are reluctant to criticize the other on political affairs. perhaps a reason for russian president vladimir putin east. i'm eunice yoon in beijing. china's got some media problems of its own, like food safety, for instance. a u.s. owned meat supplier in shanghai has been accused of selling mcdonald's and yum brands, owner of the kfc chain, expired beef and chicken at restaurants in china. even though sales have been suspended, investors were feeling a little queasy today.
shares of mcdonald's down about 1.5%. shares of yum brands down more than 4%. still ahead, the aggressive steps that some retailers are taking to fight what they call a retail funk. and whether those measures are working. some very welcome good news for the city of detroit. its plan to adjust $18 billion of debt and exit the biggest municipal bankruptcy in the nation's history is, quote, feasible according to an expert witness chosen by the judge overseeing the motor city's bankruptcy case. some good news for workers. more companies are paying higher wages. a new survey from the national
association for business economics says the share of u.s. companies raising wages in the spring quarter more than doubled from a year ago. more than half of the firms surveyed increased wages over the second quarter. >> things may not be looking quite so rosy for new college grads. the research from the federal reserve bank of san francisco shows that wages for recent college graduates are rising more slowly than they are for the rest of the u.s. workforce. higher wages might be just what a lot of the nation's retailers need right now as they fight off a funk from tight fisted shoppers who are reluctant to spend their money. now retailers are fighting back. courtney reagan has more. >> reporter: it hasn't been an easy year for retailers, and the stakes only get higher. the all-important back-to-school and holiday shopping seasons have stores pulling out all the stops to get consumers buying. economic data shows consumers have been spending on big purchases, like homes and cars. but when it comes to smaller
items, like closet organizers, and clothing, retail ceos are scratching their heads.ds ceo of the container store thinks there is, quote, a retail funk going on, causing sluggish sales at his company, as well as others. staples' president of north american stores and online agrees. saying weather is no longer the foremost barometer retailers can rely on to predict traffic. >> we're seeing different behavior pattern from customers. because they do have so many choices. online, stores, ors combination. it's hard to put a finger on exactly what's going on. >> consumer funk or not retailers can't afford to sit back and wait for the tide to turn. social media buying options, aggressive pricing, and more convenient pop-up shops are just some of the strategies that retailers are using to get shoppers buying in their stores or on their websites. >> facebook recently introduced, twitter has now started to work
with credit card purchasing companies and has bought a new company as well to integrate that into their offer and the amazon phone which is really built around the idea that people can go in and use that as a showrooming device is also going to help them in terms of building at a better retail experience. >> staples is offering a 110% money back guarantee that its pricest are the lowest to keep shoppers buying school supplies in stores or on its website. even spendy is employing a less traditional strategy in order to lure consumers in. opening up a pop-up shop in new york's soho neighborhood. while many retailers have certainly lost sales to online players like amazon, more than 90% of all retail sales are still made in stores. but those in-store purchases are falling short. a major worry going intong the second most important retail season of the year. back to school. for "nightly business report," i'm courtney reagan. chipotle posts an easy
earnings beat after the bell and that is where we begin tonight's market focus. the burrito chain brought the hot sauce. 25% increase in profit, after traffic surged during the quarter. that's despite a menu price increase. it also lifted its sales outlook for the year and shares initially jumped, look at that. after hours to a new record high during the regular session the stock was slightly lower at 589.93. texas instruments also out with ruts after the close. the company's second quarter earnings beat estimates because of higher demand for its chips. but its third quarter guidance was slightly below what wall street had been looking for. shares fell slightly right after that report as you see on that graphic during the regular session the stock was up a little bit. $49.17. johnson & johnson's board announces a big buyback. the dow component will repurchase up to $5 billion worth of its stock. the buyback was announced after the close and shares initially popped on the news. finishing the regular session
half percent lower at $101.27. and halliburton posted earnings that matched estimates but revenue was well above expectations. the oil field services provider said increased drilling activity in the united states and the gulf of mexico helped up its quarterly net by 20%. it also raised its share repurchase program. the stock was up slightly at $71 a share. hasbro's profits slipped last quarter and its sales declined in its gaming unit. the toymaker did see sales for its transformer toys and other products increase. but not enough to offset those soft game results. the company said it is well positioned for the holiday shopping season. but investors were disappointed. they sent the shares down more than 2.5% to 51.78. and weak attendance at six flags weighed on that company's earnings. the company blamed the shrinking crowds on the bad weather, which extended school calendars and shortened the spring breaks. shares fell 4% to $39.31.
and a florida jury returns one of the largest verdicts ever against a tobacco company. awarding $24 billion to the wid zoe of a man who died of lung cancer. r.j. reynolds says it will appeal the verdict and calls the damages grossly excessive. r.j. reynolds is a subsidiary of reynolds american which closed 1% lower to $57.98. and according to reports, emc is being pushed to spin off its vmware unit by activist investor elliot management. that firm has taken a percentage in the storagemaker and is reportedly attempting to convince the company that sale of the unit will help the lagging stock price. that is just the ticket really that sent shares up about 5% to finish at 28.33. >> and more trouble for general motors. a new stop sale order after a botched recall. gm ordered cadillac dealers to stop selling some versions of the popular cts model, because it doesn't yet have a fix for the half million cars that were
recalled last month. over an issue in which the engine can shut off if the driver's knee hits the ignition. the cars involved are the 2003 through 2014 cts, and the 2004 through 2006 srx. well driving may be hard enough but if you fly you know how time consuming and costly that can be. especially wh all those extra fees. and starting today, there's one more. the tsa security fee on every ticket has more than doubled. phil lebeau has more on the new fee and why airlines say this increase could keep people from flying. >> reporter: whether you realize it or not, when you fly, you pay to go through security. now, it's more than double what you were paying just a few days ago. the 9/11 fee has gone from $2.50 a flight up to $5.60. unlike in the past, there's no longer a cap on how much you might pay for a trip with
multiple legs. >> i don't travel that much, but when i do, you know, i like it to be affordable. so, yeah, not good for people who travel a lot. >> i can nickel and dime my employer, it might work out. but yeah, everything just keeps going up. >> congress first imposed the tsa fee after 9/11. when airports had to beef up security lines, and thousands of officers were hired to check passengers, and bags. but over the last decade, the tax never went up while the tsa budget did. so congress has okayed a higher tsa fee that will generate another $16.9 billion. the excess money going to the federal deficit. for airlines, it's another tax they fear will hurt business. >> at some point customers will say, i'm going to do a staycation, i'll take the bus, i'm take the train, i'll find another way to get to where i'm going or i won't go there at all. >> while federal and local taxes for airline tickets have
steadily risen since the year 2000, so have the fees airlines now tack onto tickets for checking bags, changing reservations, or other services. in fact airlines worldwide generated $31 billion in fees last year. all of which means your average airline ticket is increasingly filled with charges that go well beyond the base fare. >> you got to put up with the annoyances to be able to get somewhere quick, i guess. >> i think we have no choice. so we're doomed to take it anyways. >> flyers may not like paying a higher tsa fee but there's little appetite in washington to rescind it. keeping airports safe is one area where members of congress are in agreement. even if that means you end up paying a little bit more. phil lebeau, nightly business report, chicago. coming up you might want to savor that microbrew while you can this summer. we'll tell you why next.
it's good to be the boss and it could be really good for ceo of time warner, if his company is acquired by 21st century fox, or anyone else for that matter. buchus could make 80 million bucks in so pauled parachute payments if there's a change in control at time warner. adding up all of his stock awards, life insurance payments and other compensation. that much money will buy you a lot of beer. unless the price of hops, the key ingredient for brewers keeps rising. jane wells has more on just how expensive hops prices are, and what it could mean for beer lovers. >> a little bit of citrus and pine in there, as well? >> reporter: these are heady
times for america's crowd brewers. >> i've got a great job. i love what i did. >> reporter: jeff edgerton is brew master for bridgeport brewing company, the oldest brewery in oregon. his only problem, as craft beers have gained in popularity, especially ipas, there is a shortage of hops, the flower which flavors them. >> pricing is getting crazy. one of the things that our brokers are telling us is, we need to contract out for many years ahead of time so we're contracted out right now about three years ahead. i know some breweries are contracting out five years ahead. >> wow! >> reporter: blake crosby is a fifth generation hops grower in oregon. as prices for hops have doubled, he's doubled acreage. and he's spending millions to expand into things like a machine which dries and compresses hops into palettes. >> all in all right now hops are probably at the highest they've been in ten years and we're at a place where growers can finally afford to make expansions and
really grow their businesses, which is nice. >> good deal. >> crosby's cousin vince smith says if he could grow more hops he would. >> are you going to sell everything you grow? >> yes, i am completely sold out for the next three years. >> but with so many brewers making ever hoppier beers and so many farmers rushing to add supply the industry could end up with a craft beer hangover, a hops bubble that pops. >> we've done a very good job of oversupplying the market in the past so i wouldn't doubt that we'll do that again with this. so, we'll just kind of have to play it by ear, and lock in some good prices while we can. >> stability that farmers can all drink to for now. for "nightly business report" jane wells, woodburn, oregon. finally tonight a lesson in having faith in your children, and putting your money where your mouth is. a decade ago, jerry mcilroy made a legal bet wagering around $340 that his teenaged son rory would win the british open golf tournament by the time he turned 26. the odds, 500 to 1.
as any golf fan knows, little rory, now 25, and the number two ranked golfer in the world, won the british open this past weekend, collecting a lovely trophy. his dad jerry collected a little something, too. a staggering $171,000 check on that long-ago bet. money well spent. >> putting a few kid on your kid. >> exactly. >> it always pays off. >> and supporting their dreams, too. which is so important. that will do it for "nightly business report" for tonight i'm sue herera, thanks for watching. >> and i'm tyler mathisen. we'll see you back here tomorrow.
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